At 23:00 on November 26, the original Terra ecological stablecoin USTC suddenly surged, from 0.02 USDT to 0.05 USDT within 1 hour, an increase of 250%. As of the time of writing, it remained around 0.065 USDT, a new high in a year. Affected by the anticipation of the airdrop of Mint Cash, a new stablecoin project in the Terra ecosystem, the popularity of USTC returned overnight. Market speculation is related to the airdrop empowerment of Mint Cash developed by former Terra members and the proposal to restore the USTC dollar anchor.

What is Mint Cash

Mint Cash is a BTC-collateralized stablecoin system that aims to combine the advantages of the Terra ecosystem with the anti-censorship and anti-inflation properties of Bitcoin to provide a stable and efficient payment and savings solution. Through an innovative synthetic exchange mechanism, the project not only maintains the stability of purchasing power, but also provides benefits to cash holders, while promoting the development of DeFi.

According to the official white paper, the main features and design goals of Mint Cash include:

1. It does not rely on centralized institutions and is completely supported by Bitcoin mortgage to realize stable currency exchange and payment;

2. Using the synthetic asset exchange mechanism, there is no need to occupy a large amount of collateral like the traditional over-collateralization system, thereby achieving high efficiency in the use of capital;

3. Achieve monetary policy flexibility and resist price shocks by adjusting interest rates, taxation, pledge mechanisms, etc.;

4. Provide stable and high-yield savings accounts through the Anchor protocol;

5. Supports multiple currencies, including stablecoins of other mainstream legal currencies in addition to the US dollar.

6. Learn from the economic model of traditional monetary policy and adjust it according to the characteristics of the blockchain to achieve smooth operation between Mint Cash tokens and various stable coins;

7. Avoid large capital outflows through appropriate capital control measures to maintain system stability;

8. Provide a synthetic foreign exchange lending market to increase system liquidity and realize swaps between multiple currencies.

way of participation:

Mint Cash allows users to participate in 2 ways through USTC. One is that users hold UST or LUNA before the collapse of Terra on May 10, 2022; the other is to lock and destroy a specified amount of USTC through Mint Cash’s airdrop.

team member

The core developers of Mint Cash come from the former Anchor team and Aleph Research, and its core developers will be responsible for developing the stablecoin protocol. At the same time, Aleph Research is participating in the development of Anchor Sail, a new version of Anchor Protocol. This product will play a key role in the growth and anchoring of stablecoins in the Mint Cash ecosystem. In addition, the team is also planning to cooperate with the smart contract platform CosmWasm and the EVM L1 blockchain Berachain to build Polaris EVM support based on the Cosmos SDK.

Reasons for USTC’s surge

The reason for USTCs surge is that Mint Cash core developer Shin Hyojin previously tweeted to explain the airdrop rules: We will airdrop an equal amount of tokens at a valuation of 1 USTC = 1 US dollar (specific circumstances may vary), which is as high as 99% discounts”. In the eyes of most users, USTC was only US$0.015 before this round of surge. After the surge, the current maximum is only US$0.067, so it is nothing more than a valuation amplifier of more than 20 times.

Although Shin Hyojin tweeted on the 27th to clarify, saying this is an initial valuation quote, which means that the tokens obtained will not always be exchanged at the ratio of 1 USTC = 1 US dollar, market sentiment has been ignited. Currently, the total issuance of USTC exceeds 9 billion, and it can be speculated that the nominal initial valuation of the project will be very high, even reaching several billion dollars.

Design mockup of Mint Cash

Instead of using algorithmic stablecoins, stablecoins are generated by mortgaging BTC. This method is similar to Maker DAOs over-collateralization model. So what is the difference between the design of Mint Cash and Maker DAO’s DAI coin? Is there anything unique about it?

According to the white paper published by Mint Cash, let’s take a look at the virtual liquidity model between MintCash coins and Bitcoin:

The virtual liquidity model between MintCash coins and Bitcoin is defined in the document as the following four Lemma:

Lemma III.2.1: Defines the amount of MintCash issued when n satoshis are pledged.

Lemma III.2.2: Defines the amount of MintCash destroyed when redeeming the collateral corresponding to n satoshis.

Lemma III.2.3: Defines the amount of Bitcoin collateral required to issue n RoundUnit MintCash.

Lemma III.2.4: Defines the amount of Bitcoin collateral returned when redeeming MintCash of n RoundUnits.

These formulas establish the correspondence between inputs and outputs between MintCash and Bitcoin. When the amount of Bitcoin collateral flowing into the system is different, the corresponding issuance or destruction amount of MintCash can be determined according to these formulas.

In order to control capital flows, the white paper also mentioned that it introduced the BaseCollateralLiquidity parameter, which is combined with the constant product formula in Uniswap to form a virtual liquidity model with a liquidity upper limit. This limits the total amount of capital that can flow into or out of the system per unit of time. The above-mentioned virtual liquidity model controls the capital exchange process between MintCash and Bitcoin, achieving control over the inflow and outflow of system funds. This is the basis for Mint Cash to achieve features such as flexible monetary policy and capital control.

Taken together, Mint Cash and MakerDAO demonstrate two different methods and concepts in stablecoin generation. MakerDAO’s DAI focuses on providing stability through over-collateralization and partial reliance on centralized stablecoins, while Mint Cash emphasizes leveraging Bitcoin’s decentralized attributes through a synthetic swap mechanism.

Conclusion

Overall, the goal of Mint Cash is not to bring USTC back to $1. Its essence is to launch a new project that can use USTC to participate in IDO. In addition, to a certain extent, the airdrop of Mint Cash is an active attempt by USTC to destroy deflation by expanding use scenarios. By stimulating users to actively lock USTC to participate in the airdrop, the corresponding USTC will be destroyed.

According to the information disclosed so far, USTC has little connection with the subsequent use cases of Mint Cash and the new Anchor, so users need to be cautious in participating. At the same time, it should be noted that currently Mint Cash only has a white paper and has not yet officially launched the product.

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